Beijing Haohua Energy Resource Co., Ltd. (SHSE:601101) Looks Interesting, And It's About To Pay A Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Beijing Haohua Energy Resource Co., Ltd. (SHSE:601101) is about to go ex-dividend in just 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Beijing Haohua Energy Resource's shares before the 26th of June in order to receive the dividend, which the company will pay on the 26th of June.

The company's upcoming dividend is CN¥0.35 a share, following on from the last 12 months, when the company distributed a total of CN¥0.35 per share to shareholders. Calculating the last year's worth of payments shows that Beijing Haohua Energy Resource has a trailing yield of 3.6% on the current share price of CN¥9.72. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Beijing Haohua Energy Resource has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Beijing Haohua Energy Resource

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Beijing Haohua Energy Resource paying out a modest 48% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Dividends consumed 56% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Beijing Haohua Energy Resource earnings per share are up 8.1% per annum over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Beijing Haohua Energy Resource has lifted its dividend by approximately 12% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Should investors buy Beijing Haohua Energy Resource for the upcoming dividend? Earnings per share have been growing at a steady rate, and Beijing Haohua Energy Resource paid out less than half its profits and more than half its free cash flow as dividends over the last year. In summary, it's hard to get excited about Beijing Haohua Energy Resource from a dividend perspective.

On that note, you'll want to research what risks Beijing Haohua Energy Resource is facing. Every company has risks, and we've spotted 1 warning sign for Beijing Haohua Energy Resource you should know about.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com